Silent PPOs Can be Fiscally Deadly

October 30, 2007

If you are suddenly getting discounted payments from out-of-network plans, you might be the victim of a silent PPO.

If you are suddenly getting discounted payments from out-of-network plans, you might be the victim of a silent PPO.

Under a silent PPO arrangement, a managed-care organization sells or rents its list of providers to a third party, usually another managed-care organization or a discount insurance broker. That third party then can pay the providers on the list - that's you - under its own rates, always less than your usual and customary fees and often less than the original PPO schedule you agreed to.

So, a patient arrives in your office. You treat him as an out-of-network provider, and then you submit a claim for your usual and customary rate. You get back a sharply discounted check and an EOB that refers to the original contracted fee schedule. Suddenly, you are offering discounts to payers with whom you never contracted.

Sound unfair? It has been estimated that providers nationwide have lost between $750 million and $3 billion dollars annually since silent PPOs became common in the early 1990s.

So what can you do to keep track of or - even better - avoid problems?

  • Create a separate insurance code for each contract and health plan product. Register any patient who presents with an unfamiliar card as a traditional or private payer until benefits are verified. On the back end, review the EOB - what name and/or logo appears on it? Make sure it reflects the PPO itself.

  • Make sure there is a clear definition of who the payer is and who is obligated to pay. The actual contract that you have with the PPO should identify a list of payers that are associated with the PPO. Also, insist on clauses that restrict the plan from leasing its network to someone not noted on the approved list. Make it contractually clear that any discount taken that is not part of the contract must be forfeited and that you have a right to collect total payment.

  • Keep good records and dig deeply into these issues. Managed-care companies are much more willing to address disputes when you approach them with the facts.

Several states have laws that prohibit silent PPOs, but your state may not (check with your state medical association). Therefore, it is important that you attack this issue at the point of registration and review payments on receipt of EOBs. Do a current audit to check it out. Then look at your contracts and request revisions, or make sure prior to signing a contract that terms are included to better identify who and what the PPO really stands for.

Owen Dahl, FACHE, CHBC, is a nationally recognized medical practice management consultant with over 24 years of experience in consulting for and managing medical practices, and he is the author of "Business! Medical Practice Quality, Efficiency, Profits." He can be reached at odahl@houston.rr.com or 281 367 3364.